IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Smart-grid investments, regulation and organization

  • AGRELL, Per J.
  • BOGETOFT, Peter
  • MIKKERS, Misja

Worldwide, but in particular in North America and Europe, the grid infrastructure managers are facing demands for reinvestments in new assets with higher on-grid and off-grid functionality in order to promote energy efficiency and low-carbon conversion of the energy sector. To meet societal policy objectives in terms of carbon dioxide emissions, both the composition of the generators in favor of distributed energy resources (DER) and the load, promoting integration with downstream energy useage, will change. In this paper, we chararcterize some of the effects of new asset investments policy on the network tasks, assets and costs and contrast this with the assumptions implicit or explicit in current economic network regulation. The resulting challenge is identified as the change in the direction of higher asymmetry of information and higher capital intensity, combined with ambiguities in terms of task separation. To provide guidance, we present a model of investment provision under regulation between a distribution system operator (DSO) and a potential investor-generation. The results from the model confirm the hypothesis that network regulation should find a focal point, should integrate externalities in the performance assessment and should avoid wide delegation of contracting-billing for smart-grid investments.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 2457.

in new window

Date of creation:
Date of revision:
Handle: RePEc:cor:louvrp:2457
Note: In : Energy Policy, 52, 656-666, 2013
Contact details of provider: Postal:
Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)

Phone: 32(10)474321
Fax: +32 10474304
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
  2. Vogel, Philip, 2009. "Efficient investment signals for distributed generation," Energy Policy, Elsevier, vol. 37(9), pages 3665-3672, September.
  3. repec:cor:louvrp:-2376 is not listed on IDEAS
  4. Alessandro Sterlacchini, 2006. "The R&D Drop in European Utilities. Should we care about it?," DRUID Working Papers 06-19, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  5. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  6. AGRELL, Per J. & BOGETOFT, Peter & MIKKERS, Misja, . "Smart-grid investments, regulation and organization," CORE Discussion Papers RP 2457, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Oliver E. Williamson, 1976. "Franchise Bidding for Natural Monopolies -- in General and with Respect to CATV," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 73-104, Spring.
  8. Guido Pepermans & Johan Driesen & Dries Haeseldonckx, 2003. "Distributed generation: definition, benefits and issues," Energy, Transport and Environment Working Papers Series ete0308, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  9. Sterlacchini, Alessandro, 2010. "Energy R&D in private and state-owned utilities: an analysis of the major world electric companies," MPRA Paper 20972, University Library of Munich, Germany.
  10. Leonardo Meeus & Marcelo Saguan & Jean-Michel Glachant & Ronnie Belmans, 2010. "Smart Regulation for Smart Grids," RSCAS Working Papers 2010/45, European University Institute.
  11. Che,Y.K. & Yoo,S.W., 1998. "Optimal incentives for teams," Working papers 8, Wisconsin Madison - Social Systems.
  12. Woodman, Bridget & Baker, Philip, 2008. "Regulatory frameworks for decentralised energy," Energy Policy, Elsevier, vol. 36(12), pages 4527-4531, December.
  13. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  14. Jamasb, Tooraj & Pollitt, Michael, 2008. "Liberalisation and R&D in network industries: The case of the electricity industry," Research Policy, Elsevier, vol. 37(6-7), pages 995-1008, July.
  15. Paul Joskow & Jean Tirole, 2003. "Merchant Transmission Investment," Working Papers 0304, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  16. Macho-Stadler, I. & Perez-Castrillo, J.D., 1991. "Moral Hazard with Several Agents: The Gains From Cooperation," DELTA Working Papers 91-26, DELTA (Ecole normale supérieure).
  17. Littlechild, S.C., 2001. "Competitive Bidding for a Long-term Electricity Distribution Contract," Cambridge Working Papers in Economics 0112, Faculty of Economics, University of Cambridge.
  18. Jelovac, Izabela & Macho-Stadler, Ines, 2002. "Comparing organizational structures in health services," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 501-522, December.
  19. Agrell, Per J. & Bogetoft, Peter & Tind, Jorgen, 2002. "Incentive plans for productive efficiency, innovation and learning," International Journal of Production Economics, Elsevier, vol. 78(1), pages 1-11, July.
  20. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  21. Nahum D. Melumad & Dilip Mookherjee & Stefan Reichelstein, 1995. "Hierarchical Decentralization of Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 654-672, Winter.
  22. Michael G. Pollitt, 2008. "The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 63-94.
  23. M.E. Beesley & S.C. Littlechild, 1989. "The Regulation of Privatized Monopolies in the United Kingdom," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 454-472, Autumn.
  24. AGRELL, Per J. & BOGETOFT, Peter & TIND, Jorgen, . "DEA and dynamic yardstick competition in Scandinavian electricity distribution," CORE Discussion Papers RP 1837, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  25. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344 National Bureau of Economic Research, Inc.
  26. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
  27. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
  28. Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 433-446.
  29. Jan Moen, 2009. "Regional Initiative: Which Appropriate Market Design?," RSCAS Working Papers 2009/60, European University Institute.
  30. Robert W. Fri, 2003. "The Role of Knowledge: Technological Innovation in the Energy System," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 51-74.
  31. Perez-Castrillo, J.D. & Macho-Stadler, I., 1992. "Centralized and Decentralized Contracts in a Moral Hazad Environment," UFAE and IAE Working Papers 179.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  32. Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 1: The origins of policy," Energy Economics, Elsevier, vol. 30(4), pages 1367-1384, July.
  33. de Joode, J. & Jansen, J.C. & van der Welle, A.J. & Scheepers, M.J.J., 2009. "Increasing penetration of renewable and distributed electricity generation and the need for different network regulation," Energy Policy, Elsevier, vol. 37(8), pages 2907-2915, August.
  34. Rob Aalbers & Viktoria Kocsis & Victoria Shestalova, 2011. "Optimal regulation under unknown supply of distributed generation," CPB Discussion Paper 192, CPB Netherlands Bureau for Economic Policy Analysis.
  35. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  36. Pollitt, M.G., 2008. "The Future of Electricity (and Gas) Regulation," Cambridge Working Papers in Economics 0819, Faculty of Economics, University of Cambridge.
  37. AGRELL, Per J. & BOGETOFT, Peter, . "Harmonizing the Nordic regulation of electricity distribution," CORE Discussion Papers RP 2376, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:2457. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.